Are low income and vulnerable households included in distribution system operator (DSO) flexibility markets? And if not, what can DSOs do about it?

These are the questions National Grid DSO are seeking answers to through a collaboration with CSE.

You can download the report into our research here.

Recognising the lack of data on who takes parts in DSO flexibility markets, National Grid DSO asked CSE to review their current flexibility markets, and identify tangible steps for widening participation.

(For more about the relationship between DNOs and distribution system operators (DSOs), see box at the foot of this page.)

Evidence of inequality

Our research revealed clear evidence of a correlation between household income and the creation, delivery or procurement of flexibility services.

We analysed procurement in low voltage constraint managed zones (CMZs) and as the chart below shows, significant disparities in flexibility service provision were found.

The top 10 accepted flex category (left) shows that there were higher incomes in the households present in the 10 CMZs that provided the 10 highest amounts of flexibility. In contrast, households in CMZs where less than 1% of the tendered flexibility was procured is skewed towards lower incomes.

Flexibility provision was driven by technologies such as electric vehicle (EV) chargers and air source heat pumps. However, households in low-income areas and rural regions are much less likely to deliver flexibility to DSO markets. This is despite their potential to contribute. The research therefore confirmed that comfortably off households in wealthier areas are more likely to benefit from financial incentives linked to flexibility. And that more targeted support is needed to support low income households engage with flexibility markets and deliver flexibility where it is needed within the low voltage network.

Catherine Sage is managing this project for CSE. She says, “This work shows a link between wealth and the ability to benefit from flexibility services. This is potentially driving further inequalities in the energy system. Our recommendations, which will be in forthcoming report, aim to address these inequalities and support participation in low-income and vulnerable consumer groups.”

Market rules

DSOs do not work directly with households to create the flexibility they need within their networks. However, they do set the rules that the commercial actors (flexibility service providers) must follow to be able to sell a household’s flexibility in their markets.

National Grid DSO wanted to understand if their markets rules were – unintentionally – creating barriers or limiting the type of households that flexibility service providers work with. Could changing rules increase the type and number of households participating?

A workshop held in October explored options for mitigating any capability barriers. These included:

• Adapting baselining approaches.
• Including more types of electric heating as flexibility assets.
• Undertaking more longer-term notice procurement.
• Supporting responsibility in the flexibility supply chain.

The broader picture

We carried out a broader literature review of the activities of distribution service operators (DSOs) relating to the accessibility of flexibility services.

Our analysis of technical procurement arrangements highlighted the variety of different flexibility platforms, products and baselining approaches currently used by different DSOs. We identified how this complexity may be inhibiting flexibility service providers from working with more diverse households. We also reviewed relevant findings from recent DSO innovation projects focussed on flexibility and vulnerable consumers and found a lack of evidenced solutions available for this group.

This evidence complemented some of the discussion about options for mitigating specific capability barriers, and provided some other more speculative ideas that NGED could trial to improve outcomes for vulnerable consumers within their flexibility procurement.

Next steps

In March, we will present our findings and recommendations and discuss with stakeholders at National Grid DSO’s Spring Stakeholder Engagement Event.

Following on from this we are looking to engage with flexibility service providers (such as energy suppliers) to understand their offers and the barriers these may pose for consumers. We will aim to identify solutions or ways of addressing these barriers such in order to widen the access of low-income households to flexibility services.

National Grid DSO is actively working on the recommendations we made in our report, including to:

• Share information about how system benefits are calculated and distributed by National Grid DSO publicly.
• Review their baselining approaches for domestic flexibility, with a view to increasing granularity and ensuring fair outcomes for low energy users.

CSE recognises the crucial role that fair flexibility has to play in the low carbon transition. We seek to lower barriers to participation while also championing transparency in the value of flexibility and in the building of trust.

Distribution network operators